Will Credits Or Cuts Help The "Middle-Class"?

Newt Gingrich and Peter Ferrara have a good piece up over at the Wall Street Journal Online. Essentially, Gingrich and Ferrara argue that if the Obama Administration really wants to serve the middle class and stimulate the economy, then real tax cuts rather than credits are the way to go.

G&F also note that Obama’s plan of expanding upon current and creating new federal income tax credits used ostensibly to fund various social purposes won’t do anything to stimulate investment or job growth, but will cost the government an estimated $1.3 trillion in direct welfare payments to 40% of American taxpayers who don’t pay any income tax anyway.

Additionally, these cash payments are only an incentive up to the amount of the credit, but do nothing beyond the next dollar of income. As a “middle class” taxpayer under the Obama definition (at least I think I am at this writing), I would definitely rather opt for a lower marginal tax rate (from 25% to 15% under G&F) to allow me to control my own wealth rather than waiting for my gubbmint check.

It’s a sound argument. I would only go a step further and advocate budget reductions across the board. The US needs to signal to the financial markets and foreign investors that it is serious in reigning in spending.